May 21 (Bloomberg) -- Israel and Syria acknowledged today holding indirect talks for more than a year under the sponsorship of Turkey with the aim of reaching a peace agreement, their governments said.

``The two sides have declared their intentions to hold the talks in good faith and with an open mind,'' Israeli Prime Minister Ehud Olmert's office said today on its Web site. The dialogue will be pursued in ``a serious and continuous way in order to achieve the goal of comprehensive peace,'' the government added.

Similar sentiments were expressed by Syria's Foreign Ministry in comments carried today by the state-run Syrian Arab News Agency, which credited Turkish Prime Minister Recep Tayyip Erdogan with ``incessant efforts'' to help the two sides move toward direct talks. Syrian Foreign Minister Walid al-Moallem told Agence France-Presse that Damascus ``received commitments for a withdrawal from the Golan to the June 4, 1967, line,'' right down to the shores of the Sea of Galilee, Israel's main water source.

The last direct Israeli-Syrian peace talks broke down in 2000 when the sides were unable to resolve their dispute over the Golan Heights, which Israel captured in the 1967 Six-Day War. Olmert has indicated he may consider returning some of the strategic plateau in return for peace and Syria's cutting of ties with Iran and with Palestinian and Lebanon militant groups that are hostile to Israel.

`Better to Talk Than to Shoot'

``The years which have passed since the negotiations were frozen did not improve the security situation on our northern border, which still serves as our primary source of concern for regional deterioration,'' Olmert said in a statement e-mailed by the Government Press Office. ``In such a situation, it is always better to talk than to shoot.''

David Welch, the U.S. assistant secretary of state for Near Eastern affairs, told reporters in Washington that the U.S. was kept informed by Turkey and Israel of the talks though wasn't doing any direct mediation. The U.S. focus remains on trying to get an Israeli-Palestinian peace agreement by the end of the year, he said.

``That Israel has been able to open some sort of indirect conversation about these matters with the Syrian government, with the good offices of Turkey, is a good thing,'' Welch said. ``I mean, I'm not saying it's not. And we hope it prospers. But where we're making the major investment right now is on the Palestinian track.''

Israel's stocks, bonds and currency climbed in Tel Aviv after Olmert's office acknowledged the indirect talks.

Stocks

The TA-25 Index of stocks added 14.05, or 1.3 percent, to 1,101.65 in Tel Aviv. The yield on the 6.5 percent Shahar bond due January 2016 fell 6 basis points to 5.78 percent. The price of the note, which moves inversely to the yield, gained 0.41 shekel, or 41 agorot per 100-shekel face amount, to 106.35. The shekel gained as much as 1.9 percent to 3.3187 per dollar, an 11-year high.

``The peace talks are fueling investors today and add a positive sentiment in the markets,'' said Tamir Porat, who helps manage the equivalent of $17 billion at Clal Finance Batucha Investment Management Ltd. in Tel Aviv.

The latest negotiations are based on a formula worked out at the 1991 Madrid peace conference, Olmert's office said. Israel at that time accepted the principle of withdrawal from some of the Golan Heights in the context of a peace settlement, according to the Israeli Foreign Ministry Web site.

`Difficult Concessions'

``I have no illusions: Negotiations will not be easy, it will not be simple, and it is possible that it will take a long time and may eventually involve difficult concessions,'' Olmert said today.

Lawmakers and experts on Syria and Israel said the prime ministers' readiness to negotiate stems more from a corruption probe by Israeli police than a willingness to give up the Golan.

``Olmert finds himself in a government facing a crisis, and since he probably sees early elections soon, he wants to come armed with an agreement with the Palestinians or the Syrians to convince the Israeli electorate that he is a good leader,'' political scientist Efraim Inbar, head of the Begin-Sadat Center for Strategic Studies at Israel's Bar Ilan University, said today in a telephone interview. ``If I were a settler on the Golan Heights, I wouldn't be too worried.''

Investigation

Police are investigating allegations that Olmert committed fraud and breach of trust while serving as Jerusalem mayor and later as industry and trade minister, from 1993 until he was elected prime minister in 2006. Olmert denied in a May 8 statement that he took bribes and described the funds as campaign contributions.

Lawmaker Sheli Yacimovich of the Labor Party, which is a partner in Olmert's coalition, said the prime minister was trying ``to divert attention from the envelopes of cash he received,'' the daily Haaretz reported.

Tensions between Israel and Syria have grown since Israeli forces fought a 34-day conflict in Lebanon in 2006 with the Shiite Muslim group Hezbollah, which is backed by Syria and Iran.

Lebanese factions, including Hezbollah lawmakers, announced today they have agreed to form a unity government after talks aimed at ending a political crisis that sparked Lebanon's worst fighting since the country's 1975-1990 civil war. Syria backs the accord, SANA said, citing al-Moallem.

Air Strike

U.S. intelligence officials presented videotape to lawmakers in Washington on April 24 that they said showed Syria was building a covert nuclear reactor, with North Korean help, that was capable of producing plutonium for weapons. An Israeli air strike destroyed the facility on Sept. 6.

U.S. officials had previously been silent about Syria's allegation that Israeli warplanes carried out a raid on its territory. Syria has said the site housed only an ordinary military building. Israeli and North Korean officials have declined to discuss the matter.

Inbar said Syria's fear of the U.S. was what was bringing it to the negotiating table.

``They are on the bad-guy list and afraid the Americans will go against them,'' he said. ``They are in the negotiations for the process and not the results.''

Olmert is also negotiating with Palestinian Authority President Mahmoud Abbas for the framework of a peace agreement that would lead to the establishment of a Palestinian state. Abbas said today he hoped the Israeli-Syrian talks will succeed.

To contact the reporter on this story: Gwen Ackerman in Jerusalem at gackerman@bloomberg.net.

Last Updated: May 21, 2008 16:02 EDT